How to evaluate a product, from the perspective of an angel investor

I recently had the pleasure of speaking to a group of aspiring angel investors in Australia. The theme of the presentation was about evaluating products. During the discussion, we explored the different ways to assess a startup, ways to evaluate ideas and products, and some resources that can help you along the way.

lisa-enckell

Lisa Enckell

Lisa coaches founders on go-to-market strategies, product development, fundraising and more. She's based in Singapore but work closely with Antler's portfolio companies and the team all over the world.

Previously, she was the VP of marketing at Wrapp, a social gifting startup based in San Francisco and Stockholm. Lisa is an active angel investor and is part of Antler's investment committee. She has invested in companies such as Sunrise, Clue, and Opbeat.

While uncertainty is prevalent in early-stage investing, a careful assessment can pay off with outsized returns. With that being said, here's a look at what was discussed, and things to think about as an angel investor sizing up your next investment opportunity.

Consider the risk/return profile of angel investing

First of all, angel investing is a very risky business. Only invest the money you don't need. Most startups fail. On average it takes six years to build a unicorn. So, if you get lucky and invest in a successful startup, your return won't come until 6-10 years from now when the startup makes an exit (IPO or acquisition).

If you have the money, and the time to spare, angel investing is one of the most impactful things you can do. You give the opportunity to very driven people to solve a problem they've identified. You help create growth and your money is spent creating jobs and solving problems.

While most startups will fail, the few that make it promise outsized returns after multiple years. It's not about looking at the risks and minimizing them, angel investors see the potential and ask "What if it works? How large can it be?" If you pick a unicorn, you can make millions of a $25k check.

Dimensions to consider when making an assessment

As an angel investor, I enter deals at the earliest stage. When evaluating startups we need to look at the product, the roadmap, and the vision, rather than user numbers. For SaaS products, we often ask, "Will this replace spreadsheets or an entire department?" The latter is more interesting.

For consumer products, we take the product for a spin. If we're not in the target audience I share with my 20-year-old cousin, my 5-year-old son, or someone else who's in the right target group. Their feedback is very important.

I ask myself: "What are people using today to solve the same problem?" "What substitutes are they using? Pen and paper? Spreadsheets? WhatsApp groups?" "How much better is this product at solving their problem?" "Will users change habits?" Changing habits is hard, very hard.

I also consider who else might be trying to solve the same problem. I check @appannie, search on @ProductHunt, and more. Other teams are likely onto it too, what makes the team you're evaluating stand out? Why will they win? I look at the team's professional background, the founder affinity and skill sets, the team-product-market fit, and team execution.

Look at the startup graveyard. Who has tried this in the past? Why did they fail? What is this team doing differently this time around? Have they done their graveyard, substitutes, and competitive analysis themselves?

Can this company be worth 100x what it is today within a few years from now?

What's the potential? Can this company be worth 100x what it is today within a few years from now? Is the market big enough, or do we think they can drastically grow the market? How much is being spent on substitutes today? Can it grow exponentially?

While there may not be many users at this point, there could be a few. A few very engaged users are way more impressive than 10,000 downloads. Getting downloads is easy, having engaged users early on is really, really hard and shows that you're onto something.

This is an op-ed by Lisa Enckell. All views and opinions expressed are her own and should not be used as investment advice. In making an investment decision, investors must rely on their own examination of the Company and the terms of the Investment including the merits and risks involved.

Curious to learn more about how Antler addresses the major risks of startups failing? Head over to our website to read about how the global Antler platform enables exceptional people and teams to build the defining companies of tomorrow, and then supports them to raise subsequent funding rounds leveraging deep relationships with top international VCs and angel investors.

Subscribe to our newsletter

Get the latest news and views from Antler’s global community

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Must-read articles from Antler

Browse our collection of founder stories, industry insights and latest startup successes from Antler Australia

See articles
Insights
5 min read
Invest in women: fast-track progress

Making progress a certainty—our north star goal at Antler—can’t happen if driven and visionary people aren’t firing at all cylinders with the support they need to tackle the pressing problems of our time. We’re marking International Women’s Day by asking women founders and team members in Antler’s global community why women are essential to progress.

Insights
5 min read
How to secure venture capital as an underrepresented founder

There is growing recognition that diverse founders and diverse teams generate more innovative solutions, ultimately building stronger businesses in the long run. Read Antler in the UK portfolio director Sarah Finegan's recent article in Startups Magazine, offering 10 tips on securing venture capital as an underrepresented founder.

Insights
5 min read
From day zero to greatness: Magnus Grimeland on the Capital Allocators podcast

How can the world tackle the increasingly complex problems of our time? With a new global infrastructure backing the most driven founders. Listen to Antler founder and CEO Magnus Grimeland discuss this—and why we're building Antler—on the Capital Allocators podcast.

News
5 min read
Antler expands into Queensland, Australia

Antler is charting a new course for innovation by expanding our presence in Australia. We are launching in Queensland and partnering with the Queensland Investment Corporation (QIC).

Supported by the Queensland Government's Queensland Venture Capital Development Fund (QVCDF), the partnership is poised to transform the state's innovation sector. With a focus on bridging the early-stage funding gap, Antler and QIC are committed to attracting and nurturing the nation's top talent, driving forward Queensland's position on the global innovation stage.

Insights
5 min read
Bridging startups and industry leaders to drive purposeful innovation

As Jeff Bezos once said: “What’s dangerous is to not evolve.” While most business leaders understand that stagnation is fatal, for a host of reasons established companies often struggle to innovate—purposefully and powerfully.

Antler’s Business Development and Collaborations Group helps global corporates drive innovation excellence through high value-generating collaborations with Antler’s 1,000+ (and growing) global startup portfolio. In our collaboration with Investa, a leading Australian real estate investment manager and developer, we are connecting them to our global community of founders and the cutting-edge solutions they are building.

Read more about the powerful outcomes that happen when ambitious startups and industry leaders come together.

Insights
5 min read
The next wave of innovation: 27 industry trends set to define 2024

What will innovation look like as we move deeper into 2024? What are the biggest industry trends that will define the coming year?

We asked our global network of Antler Operators—founders, sector leaders, CxOs, and VPs from companies including Roblox, Airtable, Shopify, Spotify, Affirm, DoorDash, Uber, Hubspot, and more, who offer 1:1 advice to Antler portfolio companies, giving them extra firepower to help fast-track their growth.

News
5 min read
Antler leads $5.1M pre-seed funding for 37 startups across Southeast Asia

This marks the highest number of pre-seed deals completed in a single round in the region.

Insights
5 min read
Shaping sustainability in venture capital

Antler's third annual ESG and Impact Report discusses our commitment to sustainability as a strategic principle that's fundamental to the success of our firm, our portfolio companies, and broader society.